Finance Committee commences income inequality study, but whose interests do they have in mind?

Published in The Hill Times on April 19, 2013

By Simon Lewchuk and Brad Wassink

Ten months after MPs voted to study income inequality in Canada, the House Finance Committee finally held their first of three meetings on the topic last Tuesday. And while three meetings isn’t much, it’s better than one, which is what the committee is said to have originally planned on. The credit goes to the civil society organizations and concerned Canadians who spoke out and demanded that the committee give more time and attention to this important issue. It seems the MPs were listening, at least partially.

But lest we get too excited about this small victory, one needs only to have been at last week’s meeting to question whether the Finance Committee is really interested in a serious, balanced discussion or mere theatrics and partisan posturing.

Last time we checked, the Canadian Taxpayers Federation, the C.D. Howe Institute, the Montreal Economic Institute and the Fraser Institute (who got two witness spots) weren’t exactly representing the interests of the common Canadian. And they certainly aren’t the go-to places for those concerned about the opportunities of the poorest 10 per cent in our country, the people we should focus our attention on first in any discussions about inequality. Yet these are the groups the House Finance Committee chose to set the tone.

Luckily, TD Bank’s chief economist, Craig Alexander made a point to bring the poorest 10 per cent into the conversation when he told the committee that “what we have is a problem at the low end of the income scale; there are barriers to growth. We have nine per cent of Canadians living in poverty, that’s three million Canadians.”

Low income severely limits the opportunities and life chances of poor Canadians. For an issue that is as hotly debated and contested as income inequality, this is one of the few indisputable facts. As a society, we’re simply not doing enough to provide the poorest among us with a decent chance in life and a measure of dignity.

Not to worry, some of the committee’s witnesses said, we can count on social mobility to provide better fortunes tomorrow for those who might find themselves in poverty today. Putting aside the questionable methodology used to make this claim, and the fact that mobility will never be possible for some, we can’t assume that this will be the case unless policy makers get serious about raising the incomes of poor Canadians.

Citizens for Public Justice’s “Income, Wealth, and Inequality” report, released last week, highlights that the poorest 20 per cent of Canadians have experienced a 26.2 per cent drop in market incomes over the last 30 years. The driving forces behind this trend have been varied, including losses to the manufacturing sector, the rise in precarious employment, and downward pressure on wages.

While market forces are partly to blame, public policy has been failing poor Canadians by reinforcing these trends. Canada’s tax-benefit system now offsets less than 40 per cent of market inequality, compared to more than 70 per cent prior to the mid-1990s. Even after we take into account the impact of taxes and transfers, the 2010 average family income for the poorest 20 per cent was only $27,300 per year, with many people living on amounts well below that line.

Here are some ways we could enhance federal tax benefits already in place, and develop programs the government has the structure to implement, in order to increase the incomes and opportunities of Canada’s poor.

Recently, UNICEF released a report on children’s well-being that ranked Canada 17th out of 29 rich countries, and gave us a below-average grade for child poverty. Last week’s slate of witnesses were in general agreement that lone-parent households are in particular need of assistance. Rather than dooming them and their children to a life of poverty, we could give them a better start by increasing the Canada Child Tax Benefit from its current maximum of $3,582 to $5,400 per child for low-income families. Most of it could be paid for by ending benefits such as the Universal Child Care Benefit and the Child Fitness Tax Credit, which put money in the pockets of high and upper-middle income Canadians but have little social value.

For the many poor Canadians who are able to work, rather than trapping them behind the “welfare wall” we could further encourage workforce participation by enhancing the Conservatives’ own Working Income Tax Benefit (WITB), as Diana Carney of Canada 2020 recommended in her testimony, so that all working Canadians below the poverty line would qualify. This would do a great deal to help lift working-age adults out of poverty to a life of greater opportunity.

We could also imagine a bold new program for poor Canadians with severe disabilities rather than tinkering with the broken patchwork of social assistance benefits they currently rely on. Establishing a basic income program at a level above the poverty line for people with disabilities would eliminate the stigma, bureaucracy, and convoluted nature of current programs.

If the Finance Committee wants to get serious about addressing income inequality and the concerns of Canadians, they need to start with the poor. The federal government has the policy mechanisms and funds at their disposal.

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